Week of Monday, December 20, 2021 | Issue 54
Sara Kulic and Jennifer Kelly, Illicit Finance and Economic Threats Team
Sachin K, Editor; Clea Guastavino, Senior Editor
Map of Afghanistan
Date: December 21, 2021
Parties involved: United Nations (UN); The UN Assistance Mission to Afghanistan (UNAMA); The Taliban; The US
The event: Due to the continuing economic and political instability in Afghanistan, the UN has proposed to pay almost $6 million USD to the Afghan Interior Ministry personnel guarding UN facilities. The proposed funds will be used for monthly wages and food allowance for the Taliban fighters guarding the UN facilities. However, the chief of Afghanistan’s Interior Ministry, Sirajuddin Haqqani, is wanted by the US Federal Bureau of Investigation and sanctioned by both the UN and the US. Experts warn that the proposed funding may constitute a breach of the UN and US sanctions on the Taliban and its leaders and the money could be diverted towards the group’s extremist objectives.
Analysis & Implications:
This proposal will likely undermine the sanctions regimes, weakening the economic pressure imposed through sanctions on the Taliban. The international parties involved will likely question the sanctioning system’s aim, challenging the validity of other US and UN sanctions. There is a roughly even chance that the influx of UN funds will be followed by the renewal of international financial aid to Afghanistan, likely reducing the country’s economic isolation.
The UN will likely establish an oversight system to ensure that the Taliban does not mismanage the funds, using them for purposes other than paying UN security personnel. The establishment of the monitoring system will likely involve dialogue between the Taliban and the UN on transparency about the funds’ allocation and the conditions for the termination of these funds in case of the Taliban’s non-compliance. The outcome of this dialogue will likely influence future communication about financial assistance from other countries to Taliban-controlled Afghanistan.
Date: December 22, 2021
Location: Brussels, Belgium
Parties involved: The European Commission; The EU
The event: The European Commission proposed a directive to help EU member States identify shell companies and prevent them from exploiting tax benefits offered by a country. The proposed rules also give EU member States the ability to request tax audits of companies from other member States. This directive aims to tackle tax evasion, which deprives the EU of an estimated €1 trillion EUR each year. If all member States agree to the proposed directive, it will take effect on January 1, 2024.
Analysis & Implications:
EU member States will likely agree to pass the proposed directive to show their determination to prevent and disrupt illicit financial activities in their countries. Member States’ ability to ask other members to conduct audits of companies will very likely strengthen the EU’s capacity to tackle tax evasion and strengthen its vigilance of and actions against shell companies and tax-related crimes. Through cooperation and information sharing between member States, illicit finance activities are likely to be detected and disrupted faster in the EU.
The proposed directive will likely deter criminal actors from using shell companies to disguise their illicit funds across the EU. Criminals will likely redirect their illicit funds to European countries that are not members of the EU and who do not have strong anti-money laundering and tax-evasion regulations, like Switzerland. There is a roughly even chance that shell companies will persist in the EU to disguise illicit funds and evade taxes if this directive is not implemented effectively by all EU member States.
Date: December 23, 2021
Parties involved: Chainalysis; Cryptocurrency users
The event: Chainalysis, a blockchain analysis platform, reported that over $7.7 billion USD of cryptocurrency were stolen from investors worldwide in 2021. Scams comprised the majority of cryptocurrency crimes in 2021, with an increase of 81% from 2020 to 2021. A Ponzi scheme targeted Russian-speakers in Eastern Europe, luring them to invest their cryptocurrency with a false promise of up to 30% more monthly returns, resulting in $1.1 billion USD in stolen cryptocurrency. “Rug-pulls,” which involve cryptocurrency project developers attracting investors before suddenly abandoning the venture and stealing users’ investments, were responsible for 37% of all cryptocurrency scam revenue in 2021.
Analysis & Implications:
The increasing trend of cryptocurrency scams almost certainly indicates that criminals are leveraging the decentralized nature of cryptocurrency to conduct their illicit operations, heightening the risk for cryptocurrency users. The minimal validation requirements from financial institutions for buying cryptocurrency, and its easy access, likely make it easy for criminals to scam investors and steal money. Cryptocurrency-based scams’ success will likely encourage criminal groups to use cryptocurrency to conduct illicit operations like money laundering.
Without greater protective measures from financial regulatory authorities to prevent cryptocurrency scams and offer legal support for victims in retrieving their lost money, criminals will almost certainly continue their scamming operations undeterred. If cryptocurrency scams persist, national financial regulatory bodies will likely criminalize ownership or ban cryptocurrencies. A ban on cryptocurrency will very likely not be enough to combat the issue of scams and illicit cryptocurrency activities as criminals will likely move their operations to a different country with lax regulations on cryptocurrency.
________________________________________________________________________ The Counterterrorism Group (CTG)
 Exclusive: U.N. proposing paying nearly $6 million to Taliban for security, Reuters, December 2021, https://www.reuters.com/world/asia-pacific/exclusive-un-proposing-paying-nearly-6-million-taliban-security-document-source-2021-12-21/
 EU proposes rules against shell companies to fight tax abuse, Associated Press, December 2021, https://apnews.com/article/business-europe-european-union-european-commission-paolo-gentiloni-e477d937c55767e2b5efd9495ccd65c2
 Crypto scammers steal almost $8bn from investors in 2021, Yahoo Finance, December 2021, https://finance.yahoo.com/news/crypto-scammers-steal-almost-8-bn-from-investors-in-2021-124210326.html